Judg7123

“Amendment 2 keeps a sales tax in place on streaming and cuts public school funding.”

NOT true: the digital goods was a statute not impacted by constitutional amendment, it was a part of the offset for the income tax cuts

The education piece is maybe the most brilliant thing this state has ever proposed… It’s basically the Dave Ramsey plan of solving problems.

We currently have $2 billion in a savings account. It can only be invested in investments that earn less than 3%.
So that generates ~$60 million for education

We also have a debt to the teacher retirement system that we have to pay off at 9% interest
You take the money earning 3% and pay off the debt running at 9%

The savings is enough to fund the stuff that was paid for with the 60 million…. And also take the extra savings and fund the teacher pays

It’s good for the retirement system because you were adding $2 billion to the retirement system

And it’s good for the education because you’re using the benefit from the interest rate difference to fund something for them

It is not bad for education in any way that can possibly be constructed


“The positive is that it caps the tax rate at 3.75 (we pay 3 now anyway so who cares).” The current maximum is 4.75 so probably good to keep a future legislature from screwing things up… And yes, the overall package brought it from 4.25 to 3.0

LINK /

Amendment 1 addresses the problem of the fox guarding the hen house…currently the members of the ONLY body who can discipline a judge are appointed by judge’s lobbying associations…. Malfeasance in office (incompetence) is not one of the things that you can be disciplined for…. And there’s currently no deadline so they take multiple years to look into things

Amendment 1 fixes all of those things

It cannot be fixed, except through a constitutional amendment because the current process is in the constitution

BigB:
That is a great summary but to highlight the key point…they are currently constitutionally obligated to pay TRSL 8.5% interest on that debt each year…but only get low cash rates on the money being held literally in the trust fund (it can’t be invested in anything but mid term t bills)

So for the last 20 years basically we’ve had $ in the checking account while just treading water and paying interest on our high interest credit card debt.

IF amendment passes in March use that trust fund (separate $2 billion totally apart from rainy day) to pay off debt and use interest savings for the raise.

Tigers0891:
This is actually one of the smartest things in the plan.

The constitution locks up $2 billion in an Education Trust Fund, but it can only invest in treasury bonds and CDs so it earns an average of 3.3% ($66 million per year)

The public would never vote to let u do anything else with it—cries of stealing from the kids etc.

The teacher retirement system has billions in unfunded liabilities from back in EWE days. During Roemer a constitutional amendment was passed requiring the state to pay on that debt with an 8.25% interest rate — under the correct theory that that’s what they would make in the stock market on the retirement system investments.

So we are paying $100+ million in extra interest on this debt than they money in the bank is earning. Basically having high interest credit card debt so you can keep money in your checking account.

If you pay it off, then the retirement system can invest it for market returns instead of just T Bills… and the state and school boards save the money they would’ve otherwise had to spend paying that interest

It is the Dave Ramsey Plan for a teacher raise— the public would never let you get to the trust fund money otherwise.

Take $2 billion from a fund earning 3.3% and pay off teacher pension debt running at 8.25%
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That allows the local savings saved on the pension costs to go to required teacher pay raise (replacing the state one-time stipend of $2,000 per year and stopping a brewing fight on how to keep paying for that). They know how awful school boards are…so the const amendment closing out the funds requires them to take every $ saved to fund the salary thing.

The savings to the state on university employee pension contributions runs more than what that fund was earning—so that solves budget impact of the lost fund interest.

“Seems a little...screwy and unfair“
Don’t disagree, but theory is that they don’t tax social security and that public pensions are the equivalent of SS (maybe at one time, but they are usually higher now)

under the plan adopted yesterday you can have $75k per couple of private retirement income over 65 with no tax (plus social security with no tax)…so that is an improvement on status quo (which currently taxes it over $21k)

Although it is an overall tax reduction, it does not have a negative impact on the state budget

A significant amount of tax was being dedicated to particular funds

The biggest of those is a revenue stabilization fund that was separate from the budget stabilization fund

They are combining those two funds which will have over $3 billion for future budget shortfalls, and then stopping the added deposits

So the tax cut does stop deposits into government savings accounts but is not projected to have a regular budget impact

I understand there is an argument for it being good public policy for the state to save $… But there is also a good public policy argument for: once you have enough saved for a rainy day stop taking it from the people in the first place

An individual making $200,000 would save $2,181 (slightly less than straight up math because you’re moving from a progressive rate structure to a flat tax so slightly less savings at bottom)

you would have to spend more than $396,000 on taxable sales items to come out behind

An individual making $100k would save $851 and that person would have to spend more than $154,000 on taxable sales tax items to come out behind

An individual making $50k would save $262 And that person would have to spend more than $47,600 on taxable sales tax items to come out behind

Just Joe:

Louisiana does not tax public pension income: social security, military, state, etc

It does tax private pension income and 401k/IRA withdrawal above $6,000 per person

This bill changes that to $12,000 per person

And also gave a $25,000 standard deduction per person over 65 ($50k a couple) would apply to any extra income (work, investment, xtra pension etc)

True, if you are only on social security then there is no income tax cut and would pay the basically half cent of sales tax, but yes this a noticeable retiree tax cut if you get any other income at all as a retiree!
A retired couple would not owe state income tax on income of $100k or more (social security/govt fully exempt, plus $24k retirement exclusion, plus $50k standard deduction)

fwiw: the Louisiana state sales tax, which is all that was adjusted, does not apply to food, prescription drugs, or utilities.

Duzz : no
They brought the rate to 5 they didn’t add 5
state sales tax goes from 4.45 to 5.0
For every hundred dollars you spend on taxable goods you pay an extra $0.55

in exchange the income tax goes from 4.25% to 3%— With the first $25,000 per couple at zero… It is a personal income tax reduction for every taxpayer

They did not tax any of the services (or expanded base) they had talked about.

Instead they added 0.55% to the sales tax rate. From 4.45 to 5 (supposed to lower to 4.75 in 5 years—probably won’t).

Income Tax Cuts.
In exchange they tripled standard deduction to $25,000 per couple ($50,000 if over 65 on top of a $12k per person retirement income exclusion, plus a full exclusion for Social Security and all government pensions).

After that deduction the income tax rate was lowered to 3% (down from 4.25).

That is the second lowest rate in nation of those states that have income tax.

So you are getting back 1.25%+ of your income to pay 0.55% more on some of what you choose to buy—I know i’m ahead.

Corporate Reform.
Corporate closed some loopholes and lowered its rate from 7.5 to 5.5. That was more than governor’s proposed 3.5% since they would not repeal movie credit and some other giveaway credits. They did close some big corporate breaks to pay for lowering rate.

They were able to repeal the franchise tax (an economically terrible tax on investing capital in the state). That did not have a budgetary impact because it was all going into a rainy day account— That account will still have $3 billion and will now be deemed full and saved for use in future budget shortfalls (but with no more added to it).

Dave Ramsey Plan for Teacher Raise.
They took $2 billion from a state trust fund earning 3.3% and paid off teacher pension debt running at 8%. That allows the local savings on the pension costs to go to required teacher pay raise (replacing a state one-time stipend of the same amount and stopping a fight on how to keep paying for it). The savings to the state on university employee pension contributions is $10m more than what that fund was earning—so that pays for lost fund earnings.

Not quite as transformative as what was originally proposed—but definitely conservative reform and the most actual progress in Louisiana’s sordid history.